Exam layout
Statement of financial position (limited company) format
A limited company's statement of financial position lists assets, then equity and liabilities. Equity shows share capital, share premium and reserves instead of a single capital figure.
The standard format
- Non-current assets
- Current assets
- Current liabilities
- Non-current liabilities (e.g. debentures)
- Equity: share capital, share premium, reserves, retained earnings
Filled example
| Ordinary share capital | RM 100,000 |
| Share premium | RM 50,000 |
| General reserve | RM 15,000 |
| Retained earnings | RM 55,000 |
| Total equity | RM 220,000 |
| Debentures | RM 50,000 |
| Total equity and liabilities | RM 270,000 |
Notes
- Equity replaces the sole trader's capital account.
- Share premium is a capital reserve and cannot be paid as an ordinary dividend.
- Debentures are a non-current liability, not part of equity.
Building and reading this format
The statement of financial position of a limited company answers two questions: what does the business control, and who has a claim on it? It follows the accounting equation. Assets are balanced by equity plus liabilities.
The top half shows resources. The bottom half shows where the money to buy them came from.
Build the top half first. Show non-current assets at carrying amount (cost less accumulated depreciation).
For example, premises cost RM200,000 with accumulated depreciation of RM40,000, so show RM160,000. Then list current assets from least to most liquid: inventory, then trade receivables, then cash and bank.
Next come current liabilities, which are debts due within one year, such as trade payables and a bank overdraft. Current assets minus current liabilities gives net current assets (working capital). A positive figure of, say, RM35,000 shows the company can pay its short-term debts from its short-term resources.
Then deduct non-current liabilities, such as a long-term loan of RM80,000, to reach net assets. Net assets must equal total equity beneath it.
The equity section is where a company differs most from a sole trader. Instead of one capital account, show issued share capital (for example, 100,000 ordinary shares of RM1 each give RM100,000). Then show reserves such as the general reserve, then retained earnings.
Retained earnings are the running total of profit kept in the business. To find the closing figure, start with retained earnings brought forward. Add the profit for the year.
Deduct dividends paid and any transfer to the general reserve. Total equity is the shareholders' claim, and it must agree to the last ringgit with net assets.
Read the statement in three steps. Check that net assets equal total equity.
Look at working capital to judge short-term health. Compare loans with equity to see how the company is funded, and look at retained earnings to see how much profit was reinvested.
Marks are mostly lost on structure. A long-term loan among current liabilities distorts working capital. Leaving out the net current assets subtotal removes information the format is built to show.
Showing non-current assets at cost, without deducting accumulated depreciation, overstates resources. Mixing share capital with reserves blurs money contributed by owners and profit earned by the business. Head the statement with the company name and "as at" a single date.
If equity sections and reserves leave you unsure where each item goes, one of our teachers can walk you through a full company statement and explain each line. Book a trial class
Related how-to
These formats are standard accounting practice with our own figures. Check your board's exact requirements on the exam boards page.
Practise the statement of financial position (limited company)
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